United States: How Have Companies Adapted To CAMs?

Last Updated: October 10 2019
Article by Cydney Posner

In this report, Critical Audit Matters: Public company adaptation to enhanced auditor reporting, Intelligize examines data from a survey, conducted by SourceMediaResearch/Accounting Today, of 171 compliance specialists at public companies to examine "how public company compliance officials are adapting their own corporate disclosure and processes to comply with this new regime." Among the issues considered were the impact of "dry runs," changes to company disclosures and changes in controls. The report includes a 25-page appendix with examples of CAMs, organized by subject matter, which should prove to be interesting reading for those about to embark on the project. Interestingly, the report stressed the importance of lining up the investor relations team to consider how best to communicate the company's message about CAMs.

As you may recall, under AS 3101, the new auditing standard for the auditor's report, CAMs are defined as "matters communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements; and (2) involved especially challenging, subjective, or complex auditor judgment." For each CAM, the auditor is required to identify the CAM, describe the principal considerations that led to the determination that the matter was a CAM, describe how the CAM was addressed in the audit, and refer to the relevant financial statement accounts or disclosures that relate to the CAM.

According to the PCAOB, CAM disclosure is designed to "make the auditor's report more informative and relevant to investors and other financial statement users. CAMs are intended to provide tailored information specific to the audit—from the auditor's point of view—on matters that require especially challenging, subjective, or complex auditor judgment." In approving the new CAM rule, the SEC observed that the new requirement "will add to the total mix of information available to investors by eliciting more information about the audit itself— information that is uniquely within the perspective of the auditor, and thus, not otherwise available to investors and other financial statement users." The new standard is effective for audits of large accelerated filers (LAFs) for fiscal years ending on or after June 30, 2019, and will be required for companies other than LAFs (excluding EGCs) for fiscal years ending on or after December 15, 2020.

The online survey received responses from 171 employees (mostly finance-related) and directors at 69 LAFs, 51 companies that will be required to report CAMs after 2020 and 51 EGCs. Companies ranged in size from under 2,500 employees (57%) to 100,00 or more employees (7%).

Dry runs

Many auditors have been working with audit committees to conduct CAM "dry runs" to get a better handle on how the new CAM disclosures will look and how the process will affect financial reporting. To perform these dry runs, some auditors are identifying CAMs using the prior year's audit, actually crafting the disclosures, engaging in discussions with audit committees about the disclosures and creating the supporting documentation. In addition, the practice session is helping to identify the types of controls that need to be developed.

Most survey respondents either conducted or plan to conduct dry runs with their auditors. In the survey, 54% of LAFs conducted dry runs; 51% of post-2020 companies have conducted or plant to conduct dry runs, but 31% are undecided; and 41% of EGCs intend to conduct them, with 45% undecided. For 68% of LAFs, management met with auditors during the dry runs; audit committee members met with the auditors for 65% of LAFs; 46% of LAFs had counsel meet with the auditors and 16% of LAFs arranged meetings between the IR team and the auditors.

Conducting dry runs turned out to be far from a trivial pursuit: 62% of LAFs held between three and six meetings with their auditors, and 14% had seven or eight meetings. Thirty-five percent of LAFs reported that the process lasted up to three months, 41% said four to six months, 14% said seven to nine months and, for 8% of LAFs, the dry-run process lasted for 10 to 12 months.

Impact of dry runs

What did companies learn during the dry runs? First, auditors identified the following potential topics for CAMs: income tax (57%); revenue recognition (49%); lease accounting (38%); intangible assets (32%); goodwill impairment (30%); business combinations (30%); allowance for loan and lease losses (27%); and valuation of loss reserves (24%). For 11% of LAFs, no topics were identified.

One important lesson that many companies learned was the need to beef up their internal controls. During the dry runs, 43% of the audit committees of LAFs identified additional controls required to be implemented; 38% identified none and 19% remained undecided about the need for new controls.

Most respondents seem to expect CAM disclosures to have an impact on the companies' own disclosures, apparently having accepted the advice of experts that CAM disclosure will be most effective if it references disclosures in the company's financial statements: 52% of LAFs, 61% of post-2020 companies and 85% of EGCs stated that they will consider updates to their financial statement disclosure; 49% of LAFs are considering changes to MD&A as a consequence of CAM results, 49% of post-2020 respondents and 40% of EGCs are considering the same; 29% of LAFs are considering updates to proxy disclosures regarding their board committees, 31% of post-2020 respondents and 45% of EGCs are also considering committee updates. Among LAFs, only 20% said that their disclosure will not change and 12% of post-2020 companies agreed.


Why are audit committees looking at companies' own disclosures? As discussed in this article from Compliance Week, generally, audit committees much prefer that the company get a jump on the disclosure so that the auditors will not need to resort to the creation of original material and the company can best frame the discussion from its own perspective. After all, no audit committee would be enthusiastic about the prospect of the auditor's sharing with the investing public the concerns that arose in performing the audit or the struggles involved in reaching conclusions about the financials. Although the adopting release suggested that the process would be an iterative one between management and the auditors, time will tell how much input audit committees and managements will have in a crunch. To best position the company, a former Director of Corp Fin cited in the article advised, audit committee members should be revisiting the company's own disclosures now, as soon as they have an inkling of which CAMs the auditor plans to identify: the "best CAM disclosure...will be one that cross references a disclosure in the financial statements." One auditor observed in the article that enhancing corporate disclosure has now evolved into a regular part of the CAM discussion. Another auditor even ventured that improving the entirety of corporate disclosure—not just the auditor's report—"'was the objective of the entire standard....It not only gets the view of the auditor's unique perspective on corporate reporting, but it could help the overall disclosure package in total.'" The ineluctable conclusion: start the process early and, as part of that process, revisit the company's own disclosures. (See this PubCo post.)

Although the article advocates that companies involve their IR teams in the CAM disclosure process, the survey indicates that only a small percentage of companies have taken any steps in the direction. Only about a third of LAFs IR teams have met with management, the auditors or the audit committee about the presentation of CAMs to the investing public. And even fewer (28%) have met with the financial reporting team or corporate counsel.

Surprisingly, a substantial number of non-LAF respondents plan to voluntarily or early adopt CAM disclosure requirements. Of companies that will be required to report post-2020, 55% said they plan to early adopt, 29% were undecided and 16% had decided against early adoption. Among EGCs, 39% responded that they plan to apply the CAM requirements voluntarily to audits that do not require CAM disclosure, 39% are undecided and 22% will definitely not apply them voluntarily.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions